Snakes and ladders

The pension industry is warning the Treasury that trying to axe Asps could be a dicey move, says James Salmon

An inside source at the Treasury accuses tax advisers of “wilfully seeking to abuse” Asps, which were set up as a special concession for a select group of people with a religious objection to annuitisation and pooled mortality risk.

The source told Money Marketing: “We will take all action necessary to clamp down on this abuse but, if it persists, we will unfortunately have to remove the concession entirely.

“It is unfortunate that the same tax advisers who always complain about blanket legislation then regularly seek to exploit any concessions and reliefs that we introduce.”

But suggestions that the Treasury may do away with Asps will inevitably spark fears of yet another damaging U-turn.

Standard Life head of pensions policy John Lawson objects to the accusation of wilful abuse levelled at advisers and says he believes there is no justification for a crackdown on Asps, let alone a ban.

He says: “Some people are completely opposed to buying an annuity so if the law allows an alternative option, such as taking out an Asp, then how do we stop it? What does the Government expect the market to do?”

From an adviser perspective, Syndaxi Financial Planning managing director Robert Reid says he is concerned that advisers may land themselves in hot water if they do not inform any suitable client of an opportunity that is legal although frowned on by the Government.

Lawson believes that cracking down on Asps on religious grounds is a clear violation of the Employment Equality (Religion and Belief) Regulations (2003), which stem from a European directive. He says: “What the Treasury Economic Secretary Ed Balls suggested is unlawful with absolute certainty for occupational schemes such as small self-administered schemes. We and every other pension provider are disobeying Ed Balls and not restricting Asps to Plymouth Brethren.”

With a Treasury source admitting that it has ruled out the option of enshrining the Asp restriction in law for fear of breaching human rights legislation, Hargreaves Lansdown head of pensions research Tom McPhail says the Government’s actions smack of hypocrisy.

He says: “This is completely hypocritical. If the Government does not have the courage of conviction to enshrine this restriction on Asps in law, it cannot then put pressure on advisers to restrict the use of Asps among their clients. The restriction is clearly religious discrimination. We are not living in the 17th Century.”

Reynolds Porter Chamberlain partner Jonathan Davies says the only reason advisers and pension providers can discriminate on religious grounds is if they are compelled to do so by statute. If not, as is in the case with Asps, he says they are “treading on very thin ice legally” and could fall foul of EU legislation. Fishburns Solicitors’ Harriet Quiney says any Government that does legislate in favour of one religion may well find itself at the sharp end of a discrimination claim. She cites Islamic mortgages as another example whereby the Government has sanctioned the creation of a product designed specifically for one religious group but points out that these products are not restricted to Muslims.

Lawson believes the Government is backing itself into a corner and has limited alternatives at its disposal. He believes the only plausible options left open to the Government are to accept the widespread use of Asps or raise taxes on Asps or monies passing on death via Asps.

McPhail suggests that the Government has got itself into a pickle unnecessarily as the Revenue can take more tax from Asps than annuities in many circumstances.

Winterthur Life pensions strategy manager Mike Morrison says the Asp market is strictly limited and the Government is making a mountain out of a molehill.

He argues that there are wider issues at stake and says eradicating or restricting Asps would result in another major blow to consumer confidence at a time when the pension industry needs to build public confidence in long-term savings.

Lawson believes the Government is missing the bigger picture as forced annuitisation will act as yet another disincentive for savers. “This can only have a detrimental effect on the market. There are few people using Asps but I think they are aspirational. Scrapping or clamping down on them will put people off saving.”

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